The Cost of Buying a House
Buying a new home is one of the biggest investments you’ll make. As well as the initial deposit, there are a number of other costs involved in buying a house that you can expect to encounter on your home buying journey.
As with any big purchase, preparation and budgeting is key. To do that, you need a transparent view of the costs when buying a house. From the obvious big spends to some you may not have considered, here is a quick guide to the main costs involved to help you work out your home buying budget.
Upfront house buying costs
The upfront costs of buying a house make up your main spending during the move. These are costs that must be paid to ensure to process runs smoothly, so you need to be sure you have enough saved and put aside to cover them. Your upfront costs include:
The first and perhaps more obvious cost of buying a home is your deposit. When buying a home, you don’t usually pay the full home cost upfront – instead, you pay a deposit to secure the property, and then a monthly mortgage to pay off the remaining costs.
Traditionally, most mortgage lenders asked for at least a 10% deposit. Now, through Help to Buy, the Government-backed home buying scheme, you can move into your dream Keepmoat home with just a 5% deposit – making home buying more affordable. You can find full details of the Help to Buy options available here.
Stamp Duty / Land and Buildings Transaction Tax (Scotland)
Stamp duty is a government tax when buying a home, applicable to houses that cost £125,001 or more. Stamp duty can, however, vary depending on personal circumstances and whether you’ve bought a home before – first-time buyers can expect no stamp duty on the first £300,000 spent on a property.
Great news for prospective home buyers – you will now pay zero stamp duty on any home that costs up to £500,000 in England until 31 March 2021. And, in Scotland there is zero Land and Buildings Transaction Tax on any home that costs up to £250,000 or less.
All mortgage lenders will want to value your new home for themselves before they lend you the money – even on our homes which offer fantastic value for money. Each lender is different and some offer a free valuation service, whereas others will charge – on average you should expect to pay from £150-£200.
When moving to a new house you need a solicitor to carry out the legal work of buying (and possibly selling) your home – this is called conveyancing. Your solicitor will handle all contracts, provide legal advice and carry out local council searches, work with the Land Registry and transfer the funds to pay for your property. Costs can vary depending on whether you’re buying and selling or just buying, but budget for between £500-£1,500 and don’t forget to add on 20% for VAT.
Particularly if the home you’re buying is not a new build, it is important you get the property checked over by a surveyor before you make your purchase. An independent surveyor can highlight any problems with the property that may need to be fixed before you buy or things that may bring about additional costs once you’ve moved in.
There are different levels of survey you can opt for – cheaper options cost from £200 and cover the basic condition of your home, while full structural surveys can be anything from £600+. While it could be tempting to pay less upfront, having a thorough survey carried out before you move can save you money on repairs in the long term.
Electronic transfer fee
Many mortgage providers charge a fee for transferring your mortgage money from themselves to the solicitor. Be sure to check but the usual cost is between £40 and £50.
It’s important not to forget to budget for home insurance. Having adequate cover is one of the conditions your mortgage lender will set out before lending you the money, but this doesn’t mean you have to buy insurance from them. Shop around and don’t forget you may be able to get a better deal when you combine your building and content insurance into one policy.
House buying costs: Moving day
Once you’ve paid all your upfront costs and almost completed the home buying process, it’s time to prepare for moving day. Moving day itself is a day that turns up additional costs. Make sure you’ve budgeted for:
From boxes to bubble wrap, the costs of packing up your belongings can quickly add up. You can save money during this process by putting aside boxes in the build-up to the move or asking around in case anyone you know has any spare.
How much or how little you spend on removals is up to you. A professional removal service definitely makes moving in day run smoother but can cost anything from £300 to £2,000, so it’s worth shopping around and comparing what you get for your money.
Hiring a van and doing it yourself is the cheaper option if you don’t mind a bit of hard work. Remember to recruit family and friends to help if you can and check our moving day guide for more tips.
If you’re leaving a rented property, it is likely written into your contract that it must be cleaned. If rental properties are not left properly cleaned, it is possible you will face additional charges from your landlord or letting agent or may lose this cost from your deposit. For this reason, many choose to shop around and pay for a professional cleaner themselves. If you’re leaving a rented property, ensure you’re prepared for any additional costs such as this.
Costs when buying a house: Ongoing costs
So, you’ve done the hard part. Congratulations on buying your new home! Your initial house buying costs should all be covered at this point, however, the ongoing costs of owning and maintaining a home still apply. Once you’ve bought your home, here are some of the monthly costs you can expect to budget for.
You’ve paid a deposit towards your home which enables the buying process; the remaining cost of the home will need to be paid each month via your mortgage. The cost of your mortgage will be arranged earlier in the home buying process when you speak to your mortgage advisor. The price of your mortgage repayment will, of course, depend on the value of your home, as well as how much deposit you’ve already paid.
Home maintenance and repairs
The first year of owning a property is nearly always the most expensive – the average repair bill for a new homeowner is upwards of £5,000. You should have already had a survey carried out on your property which will have highlighted any repairs that need carrying out. If you’re moving into an older property, you may also be planning structural or interior renovations, which should have been budgeted for when choosing your house.
Of course, if you’re moving into a new build home, you won’t have repairs to worry about. However, furniture and decorating costs can also add up quickly, so consider what you need and want to buy once you’ve moved in, and ensure you’ve put enough money aside.
As with any property, once you’ve bought your new home you will be responsible for utilities and tax. Council tax costs differ based on where your property is located and which council tax valuation band it falls in – it is worth checking this information when you are house hunting. Utilities such as water can also sometimes differ based on location, so be sure to ask the sellers how utilities work in the property and how much you can expect to be paying each month.
If you’re buying a property, you will either be buying on a freehold or leasehold basis. If your home is leasehold, this means you are required to pay ground rent and service charges on the property – this is paid to whoever owns the freehold.
Ground rent is usually £50-£100 a year, while services charges can be up to £1,000+ a year. This price changes from property to property so may be much more, or much less. Make sure you’re aware of these additional charges when you’re deciding whether a property is right for you.
Costs if you’re also selling your home
If you’re selling your current home as well as buying, there are additional fees you can expect to pay. You will be responsible for your share of the legal fees, but also need to consider:
Estate agent fees
If you’ve got a home to sell, there’ll be estate agent fees to pay – these usually range from 1-3% of the sale price plus 20% for VAT.
We can help make selling your home quick and save you a fortune too with our Easymove scheme. We’ll take care of everything from arranging valuations and negotiating the sale to recommending solicitors and mortgage advisers. And when your house is sold, we’ll pay the estate agent fees in full. So that’s one less cost to think about.
*All the costs mentioned are for illustrated purposes and can vary, please speak to an Independent Financial Advisor if you require financial advice.